Capital Importation Drops 46.86% To $5.12bn In 2016, Says NBS

The National Bureau of Statistics (NBS), on Wednesday, February 1, 2017, released its Nigerian Capital Importation- Q4 2016 Report, indicating that capital importation, comprising Foreign Direct Investment, Portfolio and other investment reduced drastically in 2016, dropped by 46.86% from $9.64 billion in 2015 to $5.12 billion.
According to the NBS, “this was the lowest value since the series started in 2007, which reflects the numerous economic challenges that afflicted Nigeria in 2016.
“The weakening of the Naira may have had an impact: a weaker Naira means more can be purchased with each dollar, and therefore investment projects requiring naira payments cost less in dollar terms,” the report noted.
A breakdown of the figure shows that Portfolio investment, whereby investors seek quick returns rather than control of management in companies fell the most, declining by 69.81%.
This, NBS analysts believe, is most likely to have been impacted by current macro-economic and indeed the stock market conditions.
Also, foreign Direct investors, who take a longer-term view and should ordinarily carry less weight in investment decisions fell by 27.83% between 2015 and 2016, owing to Nigeria’s recession and currency problems. It was considerably less than portfolio investment.
Other investment options increased between 2015 and 2016, by 3.48%, entirely due to an increase in foreign loans.
Specifically, the value of foreign direct investment, porfolio investment and other investments dropped from $4.499 billion in 2014 to $1.548bn in 2016.
The report noted that investments from the United Kingdom remained the biggest source of inflow, at a time companies like Guinness Nigeria, with British parentage continue to get investments from that country. Britain imported capital worth $2.131 billion into Nigeria in 2016. Other brands with British parentage in the country include Unilever Nigeria and Royal Dutch Shell.
Diageo, the parent company of Guinness Nigeria, through its subsidiary- Guinness Overseas, hopes to convert loans advanced to its Nigerian arm into equities, hence the ongoing rights issue that may give it and upward of 80% equity stake, up from around 54%.
UK’s capital import, according to the NBS report is more than twice the value of the third largest investor country- the Netherlands, which accounted for $296.52 million, or 19.14% of the total.
The UK was followed by the United States, which accounted for $945.59 million investment inflow; ahead of the Netherlands’ investments worth $516.89 million. The country has always been a prominent investor in Nigeria with numerous large companies active (such as Heineken’s majority owned Nigerian Breweries and FrieslandCampina WAMCO Nigeria).